I'm an award-winning financial journalist and the author of "The Wizard of Lies," a New York Times bestseller about the Bernie Madoff scandal, and three other books on business history. As a writer for The New York Times, I have largely specialized in investigative reporting on white-collar crime, market regulation and corporate governance.
I was a member of a reporting team that was named a Pulitzer finalist in 2003 for its coverage of the aftermath of the Enron scandals. I was also a member of a team that won a 1999 Gerald Loeb Award for covering the near-collapse of Long Term Capital Management, a hedge fund whose troubles rocked the financial markets in September 1998.

Exclusive: The Secret Madoff Prison Letters

Bernie Madoff hated e-mail. He rarely used it at his high-tech Wall Street trading firm. When others did, he fretted about the trail it left behind. He wasn’t crazy about letters, either. A staffer had standing orders to destroy his correspondence with one important client. Even after December 2008, when the world learned that ­Madoff had run the largest Ponzi scheme in history, few personal letters surfaced. He always preferred to deal with people face-to-face.

But early in his 150-year prison sentence that all changed. His wife, Ruth, stopped visiting. His estranged older son, Mark, committed suicide; his surviving son, Andrew, never visited and swore he never would. His encounters with the world beyond the prison’s razor-wire perimeter shrank down to occasional meetings with lawyers.

In September 2010, in the first months of this intensifying isolation, Bernie Madoff became my pen pal–forced by captivity to rely almost entirely on e-mail and letters to carry out his last, desperate mission.

That mission: rewriting history–his own history. Where better to start than with his biographer?

I first interviewed Madoff in person at the medium-security prison in Butner, N.C. in August 2010 for my book The Wizard of Lies (Times Books, 2011). It traces the roots of his dishonesty to 1962 and details his many cliff-hanger escapes from detection, his precipitous downfall in 2008 and the epic legal struggle over the wreckage he left behind.

After that first visit–I saw him again early last year– we began to exchange letters. Soon Madoff enrolled me in the closed prison e-mail system. We have corresponded ever since, at least monthly, more often weekly, sometimes several times a day.

At first he simply responded to follow-up questions for my book. But even after The Wizard came out in hardcover last spring, his need to reach out has continued. Perhaps he believes he can use me to “set the record straight,” despite our profound disagreements about what that record is. Maybe he is trying to paint a more bearable portrait of himself in his own mind, and our correspondence is just a tool for doing that.

Whatever his motives, he displays the same talent for manipulation, deception and delusion that served him so well in his criminal life. Sometimes he transforms himself into a victim–the dupe of malevolent clients or prosecutors. One of his biggest regrets, he tells me, is not having gone to trial to tell his side; it seems not to have occurred to him that he would have been publicly eviscerated in court. He mentions repeatedly, and seriously, that he stands ready to advise lawmakers on regulatory reform. The offer’s absurdity escapes his stunted sense of irony.

He remains obsessed about his image. He insists that he was once an honest and successful trader, before unscrupulous clients–people, he says, “I foolishly trusted”–forced him to take on losses, then failed to make him whole on deals gone bad. As a result, he argues, he sank into crime. When did this take place? Madoff is fuzzy about actual details, calling it his “riddle.” It occurred, he says, sometime after the 1987 market crash, but before 1992, when he claims his Ponzi scheme began.

Madoff dishes out a lot of blame, heaping little on himself. He reserves special contempt for feeder-fund managers who invested with him and bankers who handled their accounts: Their over-the-top greed, he suggests, blinded them to obvious signs of fraud–and, therefore, they deserved their fates. Others come off as fools who cannot grasp the basics of a trader’s life–chief among them Irving H. Picard, the bankruptcy trustee trying to track the cash that flowed through his fraud and distribute it to its rightful owners.

If people could only understand him, Madoff seems to be saying, they might not demonize him. He starts an Oct. 11, 2011 e-mail to me this way: “I hope you understand that I am in no way trying to rationalize my terrible behavior.” A ray of conscience? Hardly. Near the end of that e-mail the clouds of self-deception close in again, and Madoff turns himself into a pitiful martyr: “I made the tragic mistake of trying to change the way money was managed and was successful at the start, but lost my way after a while and refused to admit that I failed at one point.”

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John, you were guilty. Only in your deluded mind do you persist in a false belief that you were innocent. This is not uncommon in mental illness and the criminally insane, especially sociopaths and psychopaths.

What a curious reaction. My book came out a year ago and hit the NYT bestseller list without any help from this Forbes story. The paperback won’t be out for months and will therefore get no benefit from this story. (And perhaps we could agree that it’s called “marketing”? Unless you think that Forbes is pimping its magazine by putting it on America’s newstands?) But it takes all sorts of viewpoints to keep the world buzzing, so thanks for sharing yours!

I think his argument is that he didn’t start out with the intent to defraud people. It is easy to believe that his investment turned into a ponzi scheme due to pride, at some point he had lost people’s money, but couldn’t admit that. This makes him no less a criminal, but it is an insightful lesson for those who would remain honest.

He claims that his losses were began when customers forced him to close out the long side of some hedged transactions that he had constructed for them, leaving him to personally carry the short side (which were somehow “long-term” and couldn’t be terminated). Of course it is unlikely that he would have constructed hedges where the maturities of the sides was not matched. But even if he did this, and even if his clients did force him to close out only half of their hedges (unlikely that their management agreements would have allowed them to do this), and even if he mindlessly returned the clients’ long profits without deducting from the proceeds their short losses to that date (how likely is that?), why didn’t he then personally hedge or otherwise offset the naked short positions that he was left with? He either had, or could have borrowed, the money to do this. It strains credibility to be told that he was helplessly stuck with a bunch of naked shorts and didn’t know how to do anything about it. In effect he is saying that he prefers to be thought of as colossally inept rather than crooked. An interesting choice for a guy with a big ego and a long history at the top of the securities business.

I couldn’t agree more with your smart analysis. I noted in my book that this explanation began to fray the moment one starts to examine it closely. I’ve frequently said that it seems Madoff would rather live with himself as a liar than live with himself as a failure — so he’s clearly refusing to see the failure embedded in his own “cover story.” Allow me one more book quote: “In a world of lies, the most dangerous ones are those we tell ourselves.” Thanks for sharing your thoughts!

I found this article quite insightful and although Madoff is one of the biggest crooks that was ever caught, not soon enough obviously, he is not the only one of the bunch. I tend to believe most of what he is saying in terms of how many of his clients are also reprehenisivley crooks with money. I don’t believe Madoff is mentally ill, I think he is just a man with no morals, no scruples, principles or ethics and he is not alone, some of the people he mentioned are his partners in crime. I am also convinced that the probe into why it happened was not deep enough. I put so much of the blame on the regulators which in my opinion are a lot of incompetent idiots that should be hang out to dry for not having the controls to flush out Madoff earlier. What is so sad is that the government continues to put regulations s on top of the many we have, when the real issue is that regulators were and are sleeping at the wheel. No amount of regulation will fix the incompetence of the “so call regulators” yet it will paralize the business community in the name of “protecting the public”. What a joke!!!